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Paying for online news – new Reuters Institute analysis

Friday, 28/10/2016

By Richard Fletcher and Rasmus Kleis Nielsen

One of the most important issues facing the news industry today is the question of when people will pay for online news.

As legacy revenues erode and the digital advertising market grows more challenging, publishers are increasingly adopting pay models to generate the money they need to invest in professional news production.

Some individual titles including both digital-born players like MediaPart in France and legacy media like the New York Times have built impressive numbers of paying subscribers, but overall, it is a minority of online news users who pay for news.

One of the key challenges publishers face is the risk that people attach a low monetary value to all online news content because there is so much free news available online. Economists and market researchers call this value the reference price. The idea is that people assign a price to products based in part on what comparable products cost, rather than on some form of cost-benefit calculation.

In a new piece of Reuters Institute research published in the academic journal Digital Journalism, we examined whether this holds true for online news.

Our research – which is based on 2015 survey data collected by YouGov for the Reuters Institute Digital News Report – looked at pay behaviour and attitudes to paying for online news in six countries (UK, USA, Germany, France, Spain, and Japan).

Three findings emerged.

First, in every country there was a strong link between paying for printed newspapers and either currently paying for online news, or expressing a willingness to pay in the future. We believe this is because buying printed newspapers helps create a reference price of above zero for some kinds of online news. If people already pay for some kinds of news, even though much news if available for free through radio, television, freesheets, and online, paying for some kinds of online news is less of a jump.

Second, in some countries we found that younger people are more likely to be paying for online news already, and in others, younger people expressed a stronger willingness to pay in the future. This sounds surprising, but we should remember that young people are much more likely to pay for online media services like Netflix and Spotify, which might in turn raise their reference price for online news. If people are already paying for other kinds of digital content, paying for digital news is less of a jump.

Finally, we found no evidence of a negative link between using public service media for online news, and either paying for online news, or expressing a willingness to pay in the future. One might assume that if people access free online news – such as from the BBC in the UK, ARD/ZDF in Germany, or NPR in the United States – their reference price for other kinds of online news might be zero. But our analysis suggests that people who use public service media news online are no less likely to pay for online news than those who don’t, and are also no less willing to pay in the future. There was some evidence of a negative link in the case of the BBC in the UK – by far the most popular public service outlet we considered. But the relationship was too weak to be statistically significant.

Many believe that one of the key difficulties that the news business faces is that few people will ever pay for online news when they can access much of it free.

But we should remember that people have long mixed news that was free at the point of consumption and premium news products that they paid for. Our research suggests some will do the same online.

Clearly, an abundance of free online news does not help publishers convince users to pay for news, especially if some of what is available for free is as good in terms of the quality of the content, user experience, etc. as what they can get for free elsewhere.

But out analysis suggests that at the individual level, accessing free online news from public service media does not by itself reduce their willingness to pay for online news from other sources. Some people mix free and paid news online as they did offline.

Clearly further research is needed in this area (and ideally research based on behavioural data rather than survey data which relies on self-reported behaviour and recall) as the potential market impact of public service media on private sector players, both digital-born and legacy, is an important issue.

But publishers pursuing pay models can take our findings as a very encouraging demonstration of the fact that many still see what they produce as not only better than what they can get elsewhere, but as so much better that some are willing to pay for it—even as they also use free online news.

Given the competition they face, this is a real testament to the value of the content they produce.